No Bottom Yet for IBB Stock

This year is setting out to be a record breaker as global equity markets are posting new record highs on a daily basis. It would be safe to assume that all sectors are participating in this glorious moment, but it is not the case. One sector stands out as a laggard—biotechnology. In particular, iShares NASDAQ Biotechnology Index (ETF) (NASDAQ:IBB) stock is down 20% year-to-date, and down 33% since peaking last year.
What is the catalyst that is driving such underperformance of this once lucrative growth sector? The answer is simple: it’s politics.
The pandemonium began when Turing Pharmaceuticals acquired the drug “Daraprim.” Daraprim is a 62-year-old drug also known by the name “Pyrimethamine.” It is used to treat the parasitic infection toxoplasmosis. It had sold for as little as $1.00 in recent years. Immediately after Turing acquired the drug, the company increased the price from $13.50 to $750.00 per pill, a 5,000% increase overnight. The news caught the media and sparked outrage. Hillary Clinton tweeted, “Price gouging like this in the specialty drug market is outrageous. Tomorrow I’ll lay out a plan to take it on. –H”
The Hillary Clinton tweet caused ripple effects, and IBB stock sold off in dramatic fashion.
Chart courtesy of www.StockCharts.com
IBB stock sunk 20% over a six-day period. It was the largest weekly drop in seven years.
The following day, the presidential candidate proposed a plan that would save Americans well over $100 billion over 10 years. The proposal would target insurers and limit out-of-pocket costs. Low-income people on Medicare would also receive rebates. These proposals were all aimed at the sector’s bottom line.
Perhaps there is solace from the Republican presidential candidate Donald Trump? After all, the Republicans’ stance is usually good for business.
However, the simple answer here is “no.”
Donald Trump has also vowed to fight the drug makers. He touted a savings number of $300 billion. He has vowed to “negotiate” the prices Medicare pays for drugs, a process that will have to pass congress, as Medicare is currently barred from negotiating lower prescription prices with drug manufacturers.
Both presidential candidates have vowed to fight the drug companies. The outlook for IBB stock is bearish, and the price chart of IBB stock confirms this stance.
Chart courtesy of www.StockCharts.com
In October 2015, IBB stock produced a death cross on the chart. A death cross is a bearish signal that is produced when a faster moving average (50-day moving average) crosses below a slower moving average (200-day moving average). Traders use this signal to confirm a bear market is on the horizon.
The trend for IBB stock is towards the downside. Downtrends are a progressive movement of lower lows and lower highs. The downtrend line is firmly intact. A close below the $240.00 support level could set off another round of selling, as a new low will trigger stop-losses.
The outlook for biotech is bleak. IBB stock will remain under pressure and there are no signs at this point in time that suggest this bear market is about to end.

The Bottom Line on IBB Stock

Never can I recall an election that was so detrimental to the future performance of a sector. Both presidential election nominees have vowed to attack these companies. Crosshairs are directly aimed at their bottom lines. Biotech stocks will stay confined in their downtrend until the newly elected president acts on his or her proposals and eliminates any speculation regarding policy.
On the bright side, if shares do manage to break above the downtrend line, it will be viewed as a positive light for IBB stock and the entire biotech sector.

iShares NASDAQ Biotechnology ETF: Has IBB Stock Finally Bottomed?

By Patrick Brik, BAS, CFA, CMT Published : July 17, 2016

No Bottom Yet for IBB Stock

This year is setting out to be a record breaker as global equity markets are posting new record highs on a daily basis. It would be safe to assume that all sectors are participating in this glorious moment, but it is not the case. One sector stands out as a laggard—biotechnology. In particular, iShares NASDAQ Biotechnology Index (ETF) (NASDAQ:IBB) stock is down 20% year-to-date, and down 33% since peaking last year.

What is the catalyst that is driving such underperformance of this once lucrative growth sector? The answer is simple: it’s politics.

The pandemonium began when Turing Pharmaceuticals acquired the drug “Daraprim.” Daraprim is a 62-year-old drug also known by the name “Pyrimethamine.” It is used to treat the parasitic infection toxoplasmosis. It had sold for as little as $1.00 in recent years. Immediately after Turing acquired the drug, the company increased the price from $13.50 to $750.00 per pill, a 5,000% increase overnight. The news caught the media and sparked outrage. Hillary Clinton tweeted, “Price gouging like this in the specialty drug market is outrageous. Tomorrow I’ll lay out a plan to take it on. –H”

The Hillary Clinton tweet caused ripple effects, and IBB stock sold off in dramatic fashion.

IBB stock sunk 20% over a six-day period. It was the largest weekly drop in seven years.

The following day, the presidential candidate proposed a plan that would save Americans well over $100 billion over 10 years. The proposal would target insurers and limit out-of-pocket costs. Low-income people on Medicare would also receive rebates. These proposals were all aimed at the sector’s bottom line.

Perhaps there is solace from the Republican presidential candidate Donald Trump? After all, the Republicans’ stance is usually good for business.

However, the simple answer here is “no.”

Donald Trump has also vowed to fight the drug makers. He touted a savings number of $300 billion. He has vowed to “negotiate” the prices Medicare pays for drugs, a process that will have to pass congress, as Medicare is currently barred from negotiating lower prescription prices with drug manufacturers.

Both presidential candidates have vowed to fight the drug companies. The outlook for IBB stock is bearish, and the price chart of IBB stock confirms this stance.

In October 2015, IBB stock produced a death cross on the chart. A death cross is a bearish signal that is produced when a faster moving average (50-day moving average) crosses below a slower moving average (200-day moving average). Traders use this signal to confirm a bear market is on the horizon.

The trend for IBB stock is towards the downside. Downtrends are a progressive movement of lower lows and lower highs. The downtrend line is firmly intact. A close below the $240.00 support level could set off another round of selling, as a new low will trigger stop-losses.

The outlook for biotech is bleak. IBB stock will remain under pressure and there are no signs at this point in time that suggest this bear market is about to end.

The Bottom Line on IBB Stock

Never can I recall an election that was so detrimental to the future performance of a sector. Both presidential election nominees have vowed to attack these companies. Crosshairs are directly aimed at their bottom lines. Biotech stocks will stay confined in their downtrend until the newly elected president acts on his or her proposals and eliminates any speculation regarding policy.

On the bright side, if shares do manage to break above the downtrend line, it will be viewed as a positive light for IBB stock and the entire biotech sector.

Dear Reader: There is no magic formula to getting rich. Success in investment vehicles with the best prospects for price appreciation can only be achieved through proper and rigorous research and analysis. We are 100% independent in that we are not affiliated with any bank or brokerage house. Information contained herein, while believed to be correct, is not guaranteed as accurate. Warning: Investing often involves high risks and you can lose a lot of money. Please do not invest with money you cannot afford to lose. The opinions in this content are just that, opinions of the authors. We are a publishing company and the opinions, comments, stories, reports, advertisements and articles we publish are for informational and educational purposes only; nothing herein should be considered personalized investment advice. Before you make any investment, check with your investment professional (advisor). We urge our readers to review the financial statements and prospectus of any company they are interested in. We are not responsible for any damages or losses arising from the use of any information herein. Past performance is not a guarantee of future results. All registered trademarks are the property of their respective owners.